Options Trader: Monday Wrapup

by: Philip Davis

I told my kids a scary bed-time story tonight.

It was about a stock market that went down! That’s right, one day the market did not set a new record, did not close at an all-time high and the people just did not know what to do…

Needless to say that was pure fiction; we know that our market will never go down (at least in dollar-relative terms). My little girls can lay down their heads and rest assured that there is no danger of a dollar comeback in the near future. My first grader even managed to stump me today with the question: "what’s a penny for?"

What Me Worry?
Today the dollar fell to a decade low against the Ringgit (Malaysia), the Rand (South Affrica), the Peso (Philippines), the Rupiah (Indonesia) and the Rupee (India). Asia was our last holdout and when you are trading down against currencies you haven’t even heard of - that’s a problem!

Fortunately, Malaysia stepped in and bailed us out by buying back $600M at 3.414 ringgits to the dollar. The Philippine Central Bank stayed out - "It would be useless to go against the trend," said a trader at a local bank in Manila. We hit a one-year low against the Korean Won today, but the Bank of Korea has indicated it will step in to bail us out (this is the part where we start humming "Proud to be an American").

On the bright side, the U.S. jumped up to 26th in the rankings of child mortality. We are locked in a 4-way tie with Croatia, Estonia and Poland. Our young protoges in Iraq managed to rank dead (literally) last in the world with one in eight children dying before their fifth birthday. This is 150% worse than their ranking in 1990 so, once again, mission accomplished boys!

This is not a political statement; this is an economic issue. This spending on the war in Iraq, with no end in sight, is why the rest of the World is losing faith in our currency. We were $260Bn in debt before this $124.2Bn surge plan. I’m not debating the strategic necessity of the spending, but let’s try to be aware of what this looks like to our foreign investors when we steadfastly oppose a timetable to cut back on budget busting military spending.

Up 24.1 %

The Dow busted out over 13,300 to finish up at 13,312 with a 48-point gain on the day.
Alcoa Inc.'s (NYSE:AA) 8% gain led the Dow, accounting for 1/2 of the gain and the reception they got should encourage more consolidation plays as investment bankers love to give investors what they want. Warren Buffett blessed merger mania this weekend by declaring he would like to do a $40-$60Bn acquisition, but I will tell you right now that PhilStockWorld will not go that cheaply! Mr. Buffett has also not gotten back to me re taking over his spot at Berkshire yet, but please put in a good word for me when you see him…

Tech was disappointing despite Apple Inc.'s (NASDAQ:AAPL) 3% gain, and the Nasdaq dropped a point along with the SOX. We got exactly the sideways trading we expected ahead of the Fed, so nothing to worry about yet:



Index

Current

Day's Move

Must Hold

Comfort Zone

Break Out

Next Goal

Dow 13,312 48 12,468 12,600 13,000 13,500
Transports 2,906 9 2,825 2,900 3,000 3,250
S&P 1,509 3 1,430 1,460 1,500 1,550
NYSE 9,825 32 9,218 9,465 9,600 10,000
Nasdaq 2,570 -1 2,454 2,500 2,600 2,750
SOX 503 -1 477 490 500 560
Russell 831 -1 803 820 850 900
Click to enlarge

US Markets

The chart is still strong with the Transports making progress as oil continues to decline (against a weak dollar), finishing the day at $61.47 and not even a bomb exploding in Las Vegas (now thought NOT to be terrorism) could spark a rally until the usual closing pump job added .50 to close crude down just .47 for the day. With just two weeks left, it’s time to roll out the barrels in Cushing, OK. We still have 294M scheduled for June delivery with just two weeks left to close:

• June - 294Mb, 232K contracts traded today, $61.47
• Jully - 202Mb, 94K contracts traded today, $63.37
• Aug. - 69Mb, 33K contracts traded today, $64.55

You can always tell the NYMEX is in trouble when the contango begins to fail and less than $2 TOTAL now separates the months of October ($66.13), November ($66.75), December ($67.28), January ($67.71) and February ($68.10), making accepting barrels you don’t actually need a very expensive game indeed!

Gold held flat at $690, but Uranium moved up 6% in its first trading day. Trading was thin so far, though.

Oil and Dollar

Our Barrick Gold Corporation's (NYSE:ABX) made another nice 2% gain (helping all of our gold stocks), Amazon.com Inc. (NASDAQ:AMZN) had a nice pullback (we sold calls), Best Buy Co., Inc. (NYSE:BBY) actually posted a gain, The Knot, Inc. (KNOT) was strong and stopped out our caller. Marvell Technology Group Ltd. (NASDAQ:MRVL) woke up, we jumped back in TASER International Inc. (NASDAQ:TASR). The following Short-Term positions were closed:



Symbol

 

 Strike

Type

Date

Qty

 Price Paid

 Price Sold

Date Sold

 Prof/Loss

Profit %

AAPL J  $   95 C 4/25 -20 $4.85  $  8.50 5/7  $    3.65 -75%
AAPL J  $   95 P 4/25 -20 $4.25  $  0.75 5/7  $   (3.50) 82%
CSCO J  $   28 C 5/1 10  $ 0.80  $  1.35 5/7  $    0.55 69%
ICE M  $ 145 C 3/6 40 $0.30  $  1.50 5/7  $    1.20 400%
ICE J  $ 140 C 4/17 20 $3.75  $  6.50 5/7  $    2.75 73%
KNOT M  $   23 C 4/30 -10 $0.85  $  0.50 5/7  $   (0.35) 41%
MRVL M  $   18 C 1/12 40 $0.60  $  1.25 5/7  $    0.65 108%
TASR J  $   10 C 4/30 100 $0.05  $  0.80 5/7  $    0.75 1500%
Click to enlarge